Is it the time to board the Railway stocks?

Railway Stocks

The stock market is unpredictable, with its ups and downs often following the pulse of geopolitical events and economic trends. In the past week, we saw a clear example of how a sudden shift in war news can create market trends. The Nifty50 index surged by a solid 4.21 percent, thanks to a ceasefire between India and Pakistan, which immediately boosted investor sentiment.

As tensions eased, market participants sought to capitalise on the opportunity, diving into stocks the initial volatility had impacted. Among the sectors that drew significant attention were defence stocks, with investors rushing in to grab what seemed like a brief opportunity in a historically volatile sector. However, another sector quietly emerged from the shadows - railway stocks.

It’s not every day that the Indian railway sector grabs the limelight in the equity market. But last week hinted at something new, a potential turning point. Railway stocks, which had a stellar rally up until mid-2023, faced a steep correction between 30 percent and 50 percent during the latter half of 2024. The bear phase seemed relentless, but just as quickly as it arrived, something changed. A rally began to unfold in the railway stocks once again, suggesting that we might be witnessing the potential birth of a new trend.

With no dedicated sectoral indices on railways from major exchanges like NSE or BSE, we took it upon ourselves to create a customised index to track this budding sector - Definedge Railways Equal Weighted Index. The index is created using 11 stocks - BEML, Containter Corporation of India, IRCON International, IRCTC, Indian Railway Finance Corporation, Jupiter Wagons, RailTel Corporation of India, RITES, Rail Vikas Nigam, Texmaco Rail Engineering, and Titagarh Rail Systems.

Together, these stocks form the heartbeat of India’s railway infrastructure and services, and their performance can offer a window into the health and future potential of the sector as a whole.

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Brijesh Bhatia

Senior Research Analyst|Definedge

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Definedge Railways Weekly Chart

The Definedge Railways Index has recently displayed some encouraging technical signs. The index found strong support at the 200-week Exponential Moving Average (200WEMA) channel, which was formed using the 200WEMA (High) and 200WEMA (Low). This support zone acted as a solid foundation, triggering the bullish momentum we see unfolding today.

What’s even more compelling is the Relative Strength Index (RSI), a key momentum indicator that measures whether a stock or an index is overbought or oversold. On the Definedge Railways Index, the RSI has recently surged above 50, a crucial psychological threshold. This movement is significant because it represents a shift in the market’s sentiment, with the bulls now back in control of the trend. Moreover, this is the highest RSI level we have seen for the index in 2025, making it all the more convincing that we could potentially be entering a new phase for railway stocks.

But how do the individual components of the Definedge Railways Index stack up?

Let’s take a closer look at the weekly RSI charts of the 11 constituent stocks.

For the first time this year, every stock in the index is showing a positive trend according to its RSI. This broad-based participation is highly encouraging; it suggests that this rally is not just a flash in the pan but rather a sustained, sector-wide movement.

What stands out across all these stocks is their increasing RSI levels, suggesting that the entire sector is undergoing a shift, with momentum building across the board.

Is it time to Board the Railway Stock Train?

While the current rally may seem enticing, it's important to approach with caution. This new trend, though promising, is still in its early stages. For those who are comfortable with medium to long-term investments, railway stocks could offer a potential opportunity.

So, are you ready to board this bullish train?

Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. This article is strictly for educative purposes only.

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